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What's Driving Xavier Niel, France's Mercurial Tech Billionaire?

Iliad founder Xavier Niel
Iliad founder Xavier Niel
Romain Gueugneau and Laurent Guez

PARIS — The stage is set in the middle of the vast, empty and decidedly cold shed of the Halle Freyssinet, a building formerly used as a shipment hub for trains and trucks near the Austerlitz railway station in Paris.

After the presidential lectern is installed, with French and European flags in the background, in comes ... not President François Hollande, but Xavier Niel, founder of the Internet service provider and mobile operator Iliad. Some have dubbed the 47-year-old entrepreneur the French Steve Jobs.

"I'm sorry, Mr. President," Niel quips with a smile. "I took your place."

The joke amuses the audience, which includes two government cabinet ministers and Paris Mayor Anne Hidalgo. Niel, who wants to turn the building into the "world's largest digital business incubator," entertains no presidential aspirations and describes himself as an apolitical non-voter. But the banter is yet another sign of his growing influence within both the French economy and society at large.

For years he was derided as a geeky and atypical sort of business leader, but this self-made billionaire has since become a singular tycoon of French capitalism, always in his own way, multiplying investments and initiatives in different areas, from the media and digital start-ups to real estate and even education. He takes an interest in everything and anything, ready to invest anywhere, as long as there are barriers to be broken.

"The idea is to push young people toward entrepreneurship, to create an atmosphere where they can dream," Niel said in a Les Echos interview.

While many engage in aggressive French-bashing, Niel can't sing his country's praises loudly enough. He sees France as a haven for entrepreneurs, a country that has no reason to envy the United States. His statesmanlike address goes straight to the government's heart, especially in the current wave of pessimism afflicting France.

Niel, who grew up in the middle-class town of Créteil south of Paris, says he is grateful for the opportunities France has offered. "This country has given me a lot, beginning with my education," he says. "France is both the world's top tourist destination and the country that produces the best engineers. I see myself in this mix, combining Anglo-Saxon rigor with Latin folly."

Still, Niel's deliberately provocative stances leave many puzzled. To his critics, he's actually a cunning player who leaves nothing to chance. "It is not ad-lib Xavier, it's all-business Xavier," one quips.

It is clear that he leaves no one indifferent, but just what exactly is Xavier Niel chasing?

He says repeatedly that his one and only job is telecommunication. Anything else can be qualified as merely "related activities." In fact, he has but one office, the one located at Iliad's headquarters in the 8th arrondissement of Paris, where his co-workers can find him almost every day.

Revolutionary forces

Niel built his fortune and made a name for himself thanks to two revolutions. The first was technological, with the inventions of the set-top box and triple-play services, which his competitors emulated. And the second was strategic, by imposing a low-cost model. For example, his French mobile network operator Free Mobile offers unlimited calls, SMS and data for 20 euros ($25) a month, a move that shook his sector to the core.

"Xavier Niel is a real visionary," says Alain Weill, CEO of news company NextRadio TV and one of Iliad's executives. He's the only one in the sector."

His friend Jacques-Antoine Granjon, CEO of event sales website vente-privee.com, with whom he invests in start-ups, says Niel is a true specialist in the telecommunications field. "He knows every market inside and out, and all the operators on the planet," he says.

Niel uses this insider's knowledge to find the best deals around the world. He knows a good deal when he sees it, which is why he made several offers last summer to acquire a majority stake in T-Mobile U.S., before seeing them ultimately rejected.

Always on the lookout for business opportunities, the ebullient entrepreneur loves nothing more than to shake up sleepy markets where competition is lacking. With France becoming too small a playground for him, he became a telecommunications tycoon by investing in several mobile network operators all over the world, always with the same successful recipe: cost reduction, simple offers and aggressive pricing.

Buying the media

Outside his favorite field, the billionaire has set his heart on the media. He personally invested in online media, but his biggest feat came in 2010 when he acquired the French "newspaper-of-record" Le Monde with industrialist Pierre Bergé and investment banker Matthieu Pigasse. The trio did it again this year and bought magazine Le Nouvel Observateur. And Niel doesn't plan to stop there. He is said to be eyeing the 24-hour news channel LCI.

His interest in the media is surprising, and Niel has had an ambiguous relationship with journalists, letting some of them in on his secrets and threatening others with lawsuits. His critics have only one explanation: By getting his hands on Le Monde, the businessman is buying himself both some respectability and a formidable tool for influence.

"The press is a billionaire's thing," one of his competitors says. "Thanks to that, he can reach any politician anytime. It can make a lot of things easier."

Indeed, Niel doesn't deny that. Since acquiring Le Monde, he says he wastes less time trying to track down political leaders. But, he adds, it's a privilege that didn't come cheap.

Start-up investment

The telecom tycoon also knows the start-up sector inside out. With his funds (Kima Ventures, NJJ Holding), he invests in up to 100 different projects every year. "He's always keeping up with what's happening in high-tech," says Nicolas Princen, who served as Nicolas Sarkozy's digital advisor before launching his own start-up. "It's a sector that is important to him. This experience, the time spent with start-ups, makes him a better market analyst."

Among Niel's investments was Nest, maker of smart thermostats, which Google bought last year for $3.2 billion.

The money he accumulates is reinvested in new projects. Like the one at the Halle Freyssinet, this "incubator" for 1,000 start-ups that is due to open in two years and on which Niel will spend about 200 million euros. On top of buying the building from the French state-owned railway company, he also bought the land around it to build accommodations and shops. The vision is ultimately to lead to the emergence of a future French Google.

"Xavier Niel comes from this world of innovative models," says Pierre Louette, Deputy CEO of French telecoms giant Orange. "Today, he is naturally involved in the digital ecosystem and all the more ready to back young entrepreneurs in whom he sees a bit of himself."

His friend, Jacques-Antoine Granjon, says the unifying vision is to "offer high-quality services at the lowest possible price."

Creating new French elites

This is also the principle behind the school project 42. Open to anyone under 26, this free information-technology school is meant to offer a second chance to those who didn't adapt well to the traditional French education system. Some see it as an opportunity for Iliad and its subsidiary Free to recruit developers on the cheap. Others aren't so cynical. "Some spend their money on art collections. Xavier instead creates a free school," says Granjon.

This form of philanthropy has aroused the interest of other billionaires. During a visit to California last summer, Niel visited Facebook CEO Mark Zuckerberg. "They talked a lot about the 42 school, start-ups, innovation, technologies," says Julien Codorniou, Facebook"s director of platform partnerships for Europe, the Middle East and Africa. "There's no other European entrepreneur that can stoke such enthusiasm at Facebook."

With his school and start-up incubator, Niel appears committed to creating a new set of French elites, capable of fashioning a different sort of capitalism, one more in sync to today's societies. The billionaire can't find strong enough words to criticize people of private means and those who have inherited their wealth, the symbols for him of the "old-fashioned" economy.

On the contrary, he believes new technologies are an opportunity for those who have nothing to create new businesses and pursue personal success. "He believes in the power of technology to redistribute value," says Nicolas Princen. Granjon concedes that these projects amount to "a bit of politics."

His competitors fear that a "Free generation" might be emerging. "He's building a certain reputation for himself," one competitor says. "All these youths will one day or another feel like they owe him."

"He's become the official geek-in-chief of the kingdom," another insider quips.

The lingering question is where will all this lead Xavier Niel? France's three other mobile network operators, which have been badly hit since Free Mobile took the market by storm, are just waiting for him to stumble. Some believe that his failure to acquire T-Mobile U.S. was a first sign. "Until recently, everything he touched would turn into gold," one critics says. "That might not be the case anymore." Another warns that he "might be a bit too self-confident. It could become a weakness."

But for now, the man seems untouchable, and it's increasingly hard to deny that he has become France's most important businessman, courted by politicians and the idol of a whole generation of young entrepreneurs. After making a remarkable entrance into the establishment he so criticized, Xavier Niel says he takes nothing for granted.

"I can assure you that I know exactly where I come from and the good fortune that I've had," he says. "If you find that I have a positive attitude, maybe it's because my business has done well. I believe that successful people tend to be optimistic."

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